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Where to find the funds to finance your homebased business.

By Carolyn Campbell

By planning ahead and considering your financial options, you can determine which sources will help you build your business and ensure your future success. Use the following tips to find the financing that will help you build and grow your homebased business:

* Create a business plan to determine how much money you need. Setting up a business plan helps you figure out which financial resources will meet your needs, Sussman says, and impresses upon potential lenders that you're serious about the venture. "If you need $1,000 to buy a computer, you will choose different sources than if you need $50,000 to buy a franchise," she says. A credit card, for example, could provide the cash you need for a computer, but it wouldn't help you come up with a franchise fee. A home-equity loan, on the other hand, would be overkill if all you need is a few hundred dollars to print marketing materials.

* Conserve your available funds to make the most of the money you have. As a seasoned homebased-business owner, Chuck Randa has found that conserving financial resources is another way to generate funds for his business. For 18 years, Randa has owned and operated Whiteface Chalet, a Swiss-style inn in Wilmington, New York. By doing all his banking with the institution that holds his mortgage, and by negotiating with a small-business specialist at the bank, Randa has been able to negotiate for specialized services that are tailored to his business's financial situation. "The bank allows us to skip a mortgage payment in our two slowest months, May and June," he says. In exchange, Randa agreed to a longer term for his loan. "And when we explained our business to the bank, they also offered us a free checking account and a safe deposit box, saving us even more money."

During the first two years of operation, Randa paid an accountant $7,000 to complete a monthly financial report for him. He saved money the next two years by learning to compile his own reports. "My computer cost $2,200, but I saved $3,000 the first year and $4,000 the second year as I continued to learn the accounting tasks."

* Pool your resources. Assembling a variety of financing sources can help you build your credibility as a viable business, which also increases your likelihood of receiving financial help from additional sources, according to Claudette Hayle, president of The Hayle Group, a New York City financial and management consulting firm that specializes in helping small businesses obtain capital. "Many financial sources don't want to be the sole lender," Hayle says. "You are much better off if you're able to acquire seed capital through friends, family or other sources rather than going to a bank as a business owner with no capital. If the bank sees that you've already acquired some funding, they often feel that you have an investment to protect. A bank that may not be as inclined to lend you the full $100,000 you need could give your package a more serious look if you come up with the first $40,000."

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